4 Pay Steep Price for Free Music

Four college students learned Thursday that free music downloads can carry a hidden price tag -- $12,000 to $17,500, to be exact.

The major record companies had accused the students -- two at Rensselaer Polytechnic Institute and one each at Princeton University and Michigan Technological University -- of fueling music piracy by running file-sharing networks on campus and offering hundreds of songs for copying.

On Thursday, the four settled the companies’ claims and promised not to violate their copyrights. Although they did not admit to committing or aiding piracy, they each agreed to pay thousands of dollars to the Recording Industry Assn. of America, the labels’ trade group.

The settlements mark the first time the record companies have recovered money from individuals in the United States accused of piracy on file-sharing networks. But they may be a harbinger of more lawsuits, as the industry starts taking its battle against online piracy directly to users.

Evan Cox, a copyright attorney in San Francisco who has helped software companies battle piracy, said the amounts are high enough to catch the attention of file swappers.

“I’d personally think twice about doing something that would cost me $12,000 to $17,500 to avoid spending 12 to 15 bucks on the occasional CD,” Cox said.

But Howard Ende, an attorney for 18-year-old Princeton University sophomore Daniel Peng, predicted that the tactic would backfire.

“This case had very little to do with Dan Peng and everything to do with the recording industry’s attempt to intimidate Internet users around the country and college students in particular,” Ende said. “They looked to instill fear, but instead they got fear and loathing.”

In the settlements, all four -- Peng; Joseph Nievelt, a 21-year-old junior computer science student at Michigan Tech in Houghton, Mich.; Jesse Jordan, a 19-year-old freshman information technology student at Rensselaer in Troy, N.Y.; and Aaron Sherman, a student studying management and computer networks at Rensselaer -- agreed not to infringe or support the infringement of the companies’ copyrights.

Peng and Nievelt each agreed to pay $15,000. Sherman agreed to pay $17,500, and Jordan agreed to pay $12,000.

For Nievelt, who was raised in a Detroit suburb, the payment amounts to nearly three years’ tuition. For each of the other three, the settlement translates to about half a year’s worth of classes.

None of them appear to have made any money off the file-sharing systems they operated, which were confined to their campuses’ computer networks.

“It’s been kind of a bad day, and a bad week and a really, really, really bad month,” Nievelt said from the dorm room he shares with two other students, where the corkboard is covered with exam announcements and fliers touting anti-RIAA rallies.

The lanky Nievelt started tinkering with computers in the seventh grade and gradually moved on to explore the flexibility of computer networking. Last summer he landed an internship at Microsoft Corp., working as a development engineer in the software giant’s headquarters in Redmond, Wash.

There, he met fellow intern Sherman, who also had spent much of his young life steeped in technology. While attending Huntington High School in Long Island, N.Y., the short-haired, clean-cut student launched a Web site dedicated to a rare genetic condition, Triplo-X syndrome.

At Rensselaer, he quickly became involved in a variety of activities, including joining the fraternity Lambda Chi Alpha and publishing extensive research on “Efficient Solutions for Peer to Peer Resource Discovery on Local Area Networks.”

When officials from Michigan Tech called him one April afternoon and told him that the RIAA was serving him with legal papers, Nievelt felt sick.

“My dad’s not happy. My mom’s more on the paranoid side,” Nievelt said. “For a while, it seemed that they [the RIAA] were going to get more money than we ever would have had in the family.”

Sherman, who could not be reached for comment late Thursday, has written or contributed to several academic papers related to file sharing and MP3, the most popular format for music on file-sharing networks. These include a treatise on FlatLan, the file-sharing software at the center of the record labels’ suit against him.

For Jordan, the $12,000 settlement will wipe out his college savings account.

It was money the quiet freshman -- who wrote his first computer program at age 9 and helped test Microsoft’s Windows 98 operating system at age 13 -- had earned by working summers at a pet store near the family home in Oceanside, N.Y.

And it was money that the family was counting on to stretch the loans and scholarships that helped cover Jordan’s $29,000 annual bill for tuition and housing.

“I’ve been out of work for a while,” said Jordan’s father, Andy, 54, a former technology manager for financial service companies. “We had a small fund set aside for his schooling, but that was in the markets and is pretty much gone.”

Noting that he owns thousands of records and CDs, Andy Jordan added: “They [the RIAA] have sued one of their most avid customers. The RIAA says that they wanted to teach these kids and their families a lesson. The lesson we learned is that we will never, ever buy another product from any of those companies again. That’s the lesson we’re going to tell everyone.”

Peng, a former salutatorian of Manalapan High School in central New Jersey, is a physics whiz who won a silver medal at the 2001 International Physics Olympiad in Antalya, Turkey. On his personal Web site, the young scientist detailed his hopes of majoring in electrical engineering or computer science, as well as his love of authors Ayn Rand and Isaac Asimov.

The Nievelt, Sherman and Jordan settlements took the form of court orders that, if violated, could subject the students to fines and jail terms. They and Peng were allowed to pay the record companies in installments spread over two or more years.

Many record company executives blame the protracted slump in CD sales on file-sharing networks, which let users copy songs from one another’s computers for free. They responded by suing the most popular networks, with mixed results.

The music industry’s suit against Napster Inc. effectively shut down the pioneering network and forced the company into insolvency. But a federal judge in Los Angeles ruled last week that two other popular networks, Morpheus and Grokster, were not liable for the unauthorized copies made by their users.

Nevertheless, every judge on the cases has held that users on these networks who offer or download files without the copyright owner’s permission are violating the law. Those rulings have supplied the RIAA with ammunition for lawsuits against individual file swappers.

Peng said in a news release, “I don’t believe that I did anything wrong.” His attorneys also defended him, saying he’d simply set up an index that enabled others on the Princeton network to find and copy all kinds of files from one another’s computers.

Lawyers for the record companies, however, said the four students facilitated piracy the same way that Napster did -- by providing on their computers a central directory to unauthorized copies of songs. They also offered 1,800 to 6,000 songs from their own computers for others on their campuses to copy, the companies alleged.

The lawsuits, which were filed early last month, asked for damages of up to $150,000 per infringement. That translated to hundreds of millions of dollars for each of the students.

Matt Oppenheim, senior vice president of business and legal affairs for the RIAA, said the settlements, although well below what the companies asked for, are “the right amount given the situation.”

Most students “will view $15,000 as a fairly significant amount of money,” Oppenheim said. He also noted that since the four suits were filed, at least 18 campus file-sharing networks have been taken down by their operators.

“The message,” Oppenheim said, “is clearly getting through that distributing copyrighted works without permission is illegal, can have consequences, and that we will move quickly and aggressively to enforce our rights.”

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Times staff writer Alex Pham contributed to this report.